When calculating ETI for employees, should overtime be included?
Important:
This answer is based on tax law year ending 28 February 2018.
Answer:
The employment tax incentive is not a tax.
The Employment Tax Incentive Act provides, in section 1, that for purposes of the definition of ‘‘monthly remuneration’’ ‘‘remuneration’’ has the meaning ascribed to it in paragraph (1) of the Fourth Schedule to the Income Tax Act. That definition specifically includes ‘overtime pay’.
This is confirmed in the guidance given by Treasury / department of labour when they state that:
“This means that the incentive amount may not remain fixed per qualifying employee where the employee earns additional payments, such as overtime. At the end of the specific month, the employer must calculate the total monthly remuneration paid to the qualifying employee and thereafter determine the amount of the incentive to be claimed.”